Difference Between Open Mortgage and Closed Mortgage
Open and close mortgage are different from each other and the major difference between them is in the mode of their payment.
Differences between open and close mortgage are given here so that you can understand them with ease:
- In case of open mortgage you get more flexibility in terms of payment options, time for payment and you pay lower rate of interest. Close mortgage has to be paid within a fixed time at a high rate of interest and you need to sell off the property for paying it.
- In case of open mortgage you need not pay any penalty while penalty is charged in case of closed mortgage.
- Open mortgage is for short term approximately for six months to one year, while closed mortgage is for long periods and can be between 6 months to 25 years. This is an advantage of closed mortgage.
- Closed mortgage cannot be refinanced before its term ends while this option is open in case of open mortgage though you need to pay penalty charges for it. The mortgage provider has the right to take decision on charging the penalty.